The SMEs i.e. the Small and Medium-Sized Enterprises/the SMBs i.e. the Small and Medium-Sized Business are independent firms. In SMEs, the number of employees is fewer. This number varies across over the other countries. In the European Union, the upper limit assigned to the number of employees of an SME is 250 employees. However, in some countries, the limit is set at 200 employees. While in the United States its considered that SMEs should include the firms with employees up to 500.
Why SMEs Needs an Accountant?
To Keep the Financial Records
To prepare Financial Statement, balance sheet, profit and loss account, cash flow statement are the key elements for reporting to the investors/ financiers/bankers. For providing the important information about the financial status of the enterprises to the shareholders along with preparing important financial statements, the company needs books of account and to prepare that an accountant in the SMEs is required compulsorily.
For Better Financial Management
The SMEs should have an accountant for forecasting of financial requirement, acquiring necessary capital and to analyze investment decisions the business must have the adequate records of all the business transactions furnished well. While keeping books of account, the transactions should be recorded according to the applicable accounting standards and principles which are currently being followed in the economy because these principles/standards bring accuracy and fulfill all the requirements of industries and law.
For Recording every Transaction
Every business transaction that takes place in the company whether it is a purchase or sale, the expenses or income, payment or receipt should be recorded in the books or in the accounting system on a regular basis. The recording of every transaction whether it says about all the expenses that are made in the accounting year. However, preparing the adequate and complete book of account is important for every business firm.
There are business transactions that require documents of each transaction that describes the business expenses to the owners. These transactions can be like sales invoice, a supplier invoice, a supplier payment, bank payments, and journals. However, the documents provided for the audit are the pieces of evidence for each transaction and are an important part of maintaining accurate records in the event of an audit which only the accountant can make hence highlighting the importance of an accountant.
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For Price Fixation
At what price one should sell their product or service is a big dilemma. In other words, price fixation is the biggest issue for all the small businessmen. Price of most of the products is fixed on the cost-plus-margin basis. The owners should have proper records of the cost elements of the product in order to ascertain its cost. Therefore the business that does not have books of account is like a blindfolded driver who can easily cause an accident which may lead to consequences.
For Fulfilling Tax Obligations
If anyone wants to do business, they are obliged to pay the taxes. Taxes for business include income tax, sales tax, excise duty, service tax, corporate tax, central sales tax etc. To know the correct amount of tax obligation and to settle the business/legal litigations, The SMEs should have adequate and accurate books of account.
Related Post: A Beginner?s Guide to Small Business Tax Deductions
As the points mentioned above suggest that every Small – Medium Enterprise should have an account compulsorily for making things go according to the planned procedure. Having an accountant will definitely make the task easy and also helps in the legal formality of the firm.